Manufacturers For A Healthy Economy Many of you know about our SoftBums Cares article series on our community outreaching (we’ve got some exciting new articles lined up too!). Right now we would like to talk publicly about our stand regarding unauthorized Co-ops.
The term Co-op (short for Cooperative) can mean, as defined by Wikipedia: “an autonomous association of persons who voluntarily cooperate for their mutual social, economic, and cultural benefit. Cooperatives include non-profit community organizations and businesses that are owned and managed by the people who use its services (a consumer cooperative) and/or by the people who work there (a worker cooperative).” These can be great service providers for our community. I belong to my local food co-op and have participated in a co-op to purchase some bulk beef directly from a farm recently. These are not the co-ops that will be discussed today. The type of co-op we are going to talk about are when someone/or some organization leads a group buy for many people in order to get a product at a discount below a Manufacturer’s Suggested Retail Price (MSRP). There are co-ops that work directly with manufacturers in an authorized manner, however the kind we are going to discuss, do not.
Retailers (when referring to this industry) often refers to a WAHM (Work At Home Mom), or family owned online or brick and mortar store that invests in a manufacturer’s line of products to carry. Retailers (family owned or not) provide customer support and education and take risk because they purchase their inventory up front believing that said product is of quality and will sell well for them. They pay taxes back into their local community and usually provide local jobs for others. They have signed an agreement with the manufacturer of the products they supply that they will uphold the MSRP and only sell below that during approved sales according to the manufacturer’s sales policy.
There is an alarming trend of co-ops that violate manufacturers’ policies and agreements. These individuals/businesses either sign up for wholesale accounts with manufacturers under the guise of a legitimate retailer model or are going through existing authorized retailers to purchase large quantities of inventory at or just above wholesale prices to then sell to their members at steep discounts. Some of these co-ops charge a membership fee, while others run them as more of a hobby and very few report these earnings for tax purposes and may even ask their “customers” to violate policies of payment vendors such as Paypal by having them submit payment for goods as “gifts” in an attempt to avoid required fees, taxes, and regulations.
These unsanctioned co-ops disrupt the entire market. Manufacturers set retail prices for what they value their product. They then offer a wholesale discount to authorized retailers so that the retailer is compensated for their time and effort in selling the manufacturer’s products. Manufacturers that do not allow co-ops are valuing their relationship with their retailers by not allowing an entity to contradict the retailer’s contract by selling below the MSRP. Many manufacturers allow for brief sales under certain guidelines but MSRPs, and policies that uphold them, keep the product from being de-valued. If a retailer violates their terms of their contract they sign with the manufacturer, their contract will be cancelled and will not be allowed to order products again from said manufacturer. Often times, warranties are void if a retailer does not sell according to the contract they signed with a manufacturer.
Everyone wants a good deal but when someone buys from one of these unauthorized co-ops, it can cause a lot of damage. When a product is widely sold at a lower price point, that price point becomes the new expected price (after all, why would someone pay more, when you can buy for less). This can result in retailers dropping products because they no longer sell and in worst case cause them to close their doors. That in turn can then lead to manufacturers closing doors because of a lack of retailers placing orders to keep up their staff and projected production. This is then reflected in the re-sale market where a product that could be sold used at a certain discount from what was purchased, is now much harder to sell when you can buy new for the same or even less.
Be an informed consumer. Do not be a victim of shady business practices. Be wary of “retailers/businesses” that only sell via social media sites like Facebook in a group buying fashion. Know that there is no PayPal buyer protection when you send payment as a “gift” and if for some reason your deal doesn’t deliver (which has happened many times in some of these fly-by-the-night co-ops), you have no recourse. There is the added risk that you may be receiving knock-off products which are often not safety compliant.
Things that may be red flags:
• The business calls themselves a co-op (though more are changing their names).
• They do not have a brick & mortar store or website or they have a skeleton site with little to nothing instock.
• They ask their customers to make payments as “gifts.”
• They only sell on a pre-order basis and for prices lower than the MSRP.
• They ask you not to tell anyone about the group’s special deal.
If you are suspicious of a particular sale, contact the manufacturer to ensure it is an authorized one. Manufacturers are looking for these ones that disguise themselves and violate their contract agreements but need your help in getting rid of them.
SoftBums does not support the business practices of the individuals/organizations as discussed above and does not allow co-ops for the selling of their products. SoftBums does support and values their relationships with their small and large retailers alike. These are hand selected businesses that provide product support and education to their customers and we are proud to have them represent us.
Here are other manufacturers that have joined our Manufacturers for a Healthy Economy cause of shutting down these illegitimate “businesses” or have gone on record regarding their stand on unauthorized co-ops:
Rockin’ Green Soap
Quote from Rockin' Green :
Our decision to not work with co-ops is out of respect for our retailers. We have a group of hard working retailers, many of which are work at home moms who are supporting their own families by offering up products and excellent customer service surrounding our products.
We have rules and guidelines that are set in place to allow these small companies to grow and thrive (because we too are a small company- this is very important to us). It has been our stance from the beginning to not allow co-ops, though recently we have had some individuals that have started co-ops without our approval. We feel that this is dishonest, and is not tolerated. There have been numerous accounts of co-ops not delivering on product or stealing money from its members, and this is not the way that we do business nor do we want to subject our customers to such shady business practices.